University of Michigan forecast says no job growth in Michigan until 2010

Michigan will have to wait another year for its long-sought economic recovery, according to a new University of Michigan forecast.

In May, U-M economists George Fulton and Joan Crary said they expected the state to gain about 4,000 jobs next year after eight straight years of losses. Now they say the state won't see job growth until 2010.

"There's going to be more pain before we see any substantial gain," Fulton said Friday.

Michigan's expected job losses and gains

2008: -51,300 jobs

2009: -37,800 jobs

2010: +33,300 jobs

Michigan will lose 51,300 jobs this year and another 37,800 next year before adding 33,300 jobs in 2010, according to the forecast.

The U-M economists said job growth in the state should start in 2010 because of a pickup in the national economy, an increase in local home building and a gradual increase in auto sales.

Vehicle sales are expected to rise to 14.9 million cars and trucks in 2010, up from 14.2 million vehicles in 2009. The U-M economists also are forecasting the same level of vehicle sales this year, 14.2 million.

Meanwhile, continued weakness in the auto and housing markets, as well as an underperforming national economy, are hammering Michigan's economy.

The Labor Department reported Friday that the U.S. unemployment rate jumped to 6.1 percent in August, the highest level in five years.

Michigan's August jobless rate has not yet been released. But the state had the highest unemployment rate in the nation in July at 8.5 percent.

Housing woes contributed to Comerica Bank's Michigan Business Activity Index falling to its lowest level in 10 years in June, the bank said this week. The index measures activity in the construction, manufacturing and service sectors, as well as job growth and consumer spending.

Dana Johnson, Comerica Bank's chief economist, said a spike in gas prices over the summer forced automakers to further restructure operations and cut thousand more jobs.

"We had earlier thought the auto restructuring was largely over." Johnson said. "That just turned out to be completely wrong."

A major shift in the market from pickups and SUVs to more fuel efficient cars has hurt domestic automakers, which have relied heavily on truck sales for their profits.

Johnson said the Detroit Three's collective market share has fallen this year to 46.9 percent, down four percentage points from the end of 2007.

"That's huge," he said. "This is causing real distress. It's a big headwind for the state."